Scandal at Volkswagen: Mo Money, No Problems?

November 9, 2015

The scandal at Volkswagen has taken many strange twists and turns since the story first broke in September—is it possible that Volkswagen can buy itself some positive PR with some customer incentives? That’s the first question we’ll tackle in this roundup of news about everyone’s favorite emissions-test cheating automaker.
All You Need Is Cash
Bribery is such an unseemly practice and one generally frowned upon in polite society. But as the saying goes, desperate times call for desperate measures—and needless to say, conditions for Volkswagen have grown quite desperate indeed.
As first reported by The Truth About Cars, Volkswagen will issue prepaid cards to compensate U.S. customers who bought diesel vehicles that violated the EPA’s emissions standards. The cards, whose monetary values range from $500 to $1,250, will be offered as part of its TDI Goodwill Program. The program is for current owners of VW diesel-powered models singled out by the EPA in its first notice of violation in mid-September. Customers can then use the VW credit toward the purchase of a non-diesel VW vehicle.
Volkswagen declined to comment on the customer incentive program uncovered by The Truth About Cars website when it was first announced. As of today, however, it appears that the company’s prepaid card campaign is official. Find out more about Volkswagen’s TDI Goodwill Program by visiting the Volkswagen Diesel Information page.
No Such Thing As Bad Publicity
Believe it or not, all of the negative press Volkswagen has accrued recently hasn’t affected the company’s bottom line as much as one might think. In fact, the German automaker reported a slight uptick in U.S. sales in its October report, with a 0.24 percent U.S. sales increase over the previous October.
This good news comes with a dump truck full of caveats, though. For one, Volkswagen’s positive October 2015 sales were largely attributable to non-diesel models like the Golf and Jetta. Additionally, the 0.24 percent increase, while impressive given the scope of the VW scandal even in early October, was nominal given the 7.8 percent jump in sales between 2013 and 2014.
For another, the solid sales VW enjoys (for now) in the U.S. aren’t wholly indicative of global trends. In Britain, for example, sales of new Volkswagen vehicles slumped 9.8 percent in October and observers there noted “the scandal had prompted consumers to be more cautious when it came to buying a new vehicle.” VW sales are also down in many major European markets like France, Italy, Spain, and—most ominously of all—Germany.
Finally, Volkswagen’s sales record in October cannot, in this case anyway, be seen as a positive indicator of the company’s financial health going forward. VW’s November report will likely be more indicative of the company’s market power, given that it’ll come in the wake of Volkswagen’s second round of EPA sanctions.
While the company will struggle to keep itself out of the red in the coming years, it will still take their victories where they can get them.
“We would like to again thank our customers for their patience and loyalty,” said Mark McNabb, Volkswagen of America COO. “Volkswagen is committed to making things right and actively working to restore trust.”
So what might account for the unexplainable steadiness of Volkswagen’s sales? Some might attribute the cause to brand loyalty or general ignorance about the technical details of the emissions cheats. But Chris Ziegler of The Verge draws an even more disheartening conclusion.
“Perhaps as the scandal deepens, as we learn more about how and why this happened, buyers will start to pick up on it and divert their cash to Volkswagen's competitors,” wrote Ziegler. “Or perhaps — and this is the coldly cynical view — many Americans simply don't care that they've been lied to about the environmental friendliness of a vehicle. There's circumstantial evidence to back this up: studies show, for instance, that SUV sales pick up when gas prices fall despite miserable fuel economy. For prospective VW buyers, it's hard to pass up a $5,000 discount on a new car.”
It’s that last consideration that Volkswagen likely had in mind when it announced its TDI Goodwill Program (or rather, when The Truth About Cars site revealed its existence and VW belatedly copped to it). The question is, will consumers be so easily swayed by rebates if and/or when further revelations about VW’s emissions cheating get unearthed?
Follow the Leader
Naturally, the continued escalation of the scandal at Volkswagen has led to a crisis of confidence in its newly installed leadership. Not only has the company’s stock taken a precipitous nosedive in the last week, but analysts also wonder how execs like Volkswagen CEO Martin Mueller will escape accountability in light of the EPA’s recent emissions cheating allegations.
“As far as the U.S. justice officials, it’s going to be much more difficult for Mueller to credibly lead Volkswagen’s efforts to uncover the fraud behind the scandal,” Ferdinand Dudenhoeffer, head of the Center for Automotive Research at the University of Duisburg-Essen in Germany, told Automotive News.
Mueller was CEO of Porsche for six years before being named Volkswagen head in late September. Given Porsche’s recently revealed role in emissions rigging—along with the potential for further cheating uncovered by investigators—many analysts are beginning to wonder when, not if, Mueller will ultimately be ousted.
Mueller has put on a brave face before the public, insisting that upper management “deeply regrets” its previous understatements of vehicle emissions levels. He then added, “We will stop at nothing and nobody [to uncover the truth].”
Microbus to the Rescue?
Clearly it’s going to take some outside-of-the-box thinking to rescue Volkswagen from its bad PR spiral (assuming that it can be rescued). Viewed in this light, Jalopnik’s proposal for VW’s salvation is certainly worth a shot.
Jason Torchinsky, Associate Editor for the automotive weblog, suggests that the German automaker bring back the Microbus as an all-electric model. According to Torchinsky, the model needs to be electric in order for VW to rebuild its environmental bonafides among consumers. Moreover, making it a Microbus will appeal to a wider audience ranging from nostalgic Baby Boomers to millennials looking for a vehicle with retro or kitsch value.
As Torchinsky writes, an all-electric Microbus “would fill a hole in two markets—the non-boring minivan, and an electric car for people who want minivan-space and flexibility, and, most importantly for Volkswagen now, it’s the only thing they have even remotely close to ready to go that would be completely free of any emission questions.” Then again, the public also assumed that VW’s non-diesel vehicles weren’t emissions-spewing messes, and look how that blew up in everyone’s faces.
As it so happens, Volkswagen had plans as recently as late October to revive the Microbus camper van. At the time, VW was going to display its Microbus concept, as well as an electric version of its classic camper van, at the Consumer Electronics Show in early 2016. Since the EPA’s second NOV this past week, however, those plans may have been placed on the back burner. As always, Auto Publishers will be sure to keep you posted.
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